A battle has been raging in the gold market but today Alasdair Macleod told King World News that bullion banks are in trouble as gold has broken out and is now set to attack the $2,000 level.
The Underlying Battle In The Gold Market
May 14 (King World News) – Alasdair Macleod: Gold has been trading in a narrowing range centred on $1700. The underlying battle was between some resolute speculators (hedge funds) and the bullion banks, who have been short all year. The daily chart below shows the classic month-old pennant formation that has resulted.
Gold Breaks Out – Set To Surge Another $250
Gold To Surge Toward $2,000
We all knew that when the break-out came, it would signal either speculators or the bullion banks would be crushed, and so did the parties involved. As it happens, it appears the speculators have won. Typically, breakouts from pennants are followed by a rapid move, mirroring the move in, telling us to expect a sharp rise in the gold price of up to $250.
Pennants are not infallible, but given the bullion banks were short before the coronavirus shutdowns in the US and Europe and all central banks’ subsequent promises to accelerate money-printing, the fundamentals appear to back a far higher gold price as well.
In the context of how markets generally are trying to adjust to the promise of monetary inflation, gold’s breakout should be regarded as a major indicator of adverse effects on currencies’ purchasing power in the coming months.
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